DEFENSE MINISTER JOSE PEDRO AGUIAR-BRANCO (through translator): I would like to begin by greeting the secretary of defense, Leon Panetta, for two reasons: because he's here representing a friendly country to Portugal and because I know that Leon Panetta is a friend of the Portuguese community in California. These are the two reasons I would like to greet him and welcome him in the name of the Portuguese people here in Forte de Sao Juliao da Barra.

Knowing that the United States is a fundamental ally of the Portuguese defense policy, in our meeting, we spoke about bilateral issues, defense issues between Portugal and the United States, especially about Lajes, and of international interest, especially about Afghanistan, where Portugal is participating with ISAF.

Concerning Lajes, I was -- I expressed my -- the Portuguese position, which we had already referred to in the communique, when the United States reduced its troop -- and the situation that causes much concern to the Portuguese government, particularly because of the impact that it will have in the Azores and because the situation must make us mitigate the situation.

I explained to Mr. Leon Panetta the delicacy and importance to work together in order to mitigate the consequences of this situation and to lessen the impact on -- in the region of the Azores. In concluding, this meeting was a very important stage in the work as allies and partners in our work to reinforce and strengthen our relationship.

SECRETARY OF DEFENSE LEON E. PANETTA: Good morning. Bom dia to all.

I'm honored to be here in Portugal today. And I'm particularly honored to be here with my -- my good friend, the minister of defense, and thank him for his gracious hospitality that he has shown me throughout my visit.

He is a good friend and someone that we -- we have both been able to develop, I think, a close relationship both at our NATO meetings and at our bilateral meetings, as well.

I've come to Portugal in one of my last overseas trips as secretary of defense to thank the Portuguese people, thank the Portuguese people for their steadfast support and for their partnership over the past decade in Afghanistan, in Iraq, and in other areas of mutual concern. And I have sought to strengthen our sustained dialogue about how we can take steps to continue to improve our relationship for the future.

Portugal is one of our oldest European allies. And America's ties to Portugal go back, indeed, to the very birth of our nation. Portugal has impacted our history, our culture, and our beliefs. In my own state of California, it was the early Portuguese explorers and missionaries that helped establish a new state along the Pacific Ocean.

Today, the United States has tremendous respect and admiration for Portugal's critical role in promoting security not only here in Europe, with its strong participation in NATO's Kosovo mission -- they're doing an impressive and remarkable job in Kosovo, helping to provide security there -- but also around the world, from the Indian Ocean to the Middle East and to Africa.

In our meeting today, the minister and I discussed the program we are -- the program that both of us are involved with, with regards to our relationship in Afghanistan and we both discussed the progress that is being made as well as the Afghan security forces move to assume the lead for security throughout the country this spring and take full responsibility for security nationwide by the end of 2014.

I was able to provide the minister and his staff an update on the discussions that we had with President Karzai last week and with the decisions that were made at that time. As the war in Afghanistan draws to a close, the minister and I also discussed how to build on our close defense relationship even as both of our nations deal with steep fiscal challenges.

In the United States, those challenges, just as in Portugal and in other countries, have forced us to make some difficult decisions with regards to our defense budget. Those include decisions to reduce the size of our military and to adjust our global force structure. We were presented by Congress in the Budget Control Act a number of $487 billion to reduce the defense budget over 10 years, and we have implemented a strategy to accomplish that.

As a result of these kinds of changes, we've made clear that there would be an impact in terms of the tempo of operations at Lajes Air Base. But I want you to know -- and I said this directly to the minister, and I say it to the Portuguese people and to the people of the Azores -- we will do everything we can to minimize the impact and the hardship to that community and, indeed, we will use this as an opportunity to build an even stronger mil-to-mil relationship between the United States and Portugal.

Today I made clear to the minister that I am fully committed to work with him and the local community to be able to mitigate the impact of this decision with the local community. That effort is going to be directed along three tracks.

First, let me make clear that the United States military is committed to Lajes Air Base. This is an important air base for us. It has important airlift capabilities. It will remain a vital part of our global forward posture. We will need to continue to make use of this important base.

As a result, we'll do everything possible to try to lessen the economic impact of the reduction in tempo. We're committed to working with the local community to provide aid and maintain a strong relationship that we have built over the years.

Let me say to the people of the Azores that support that base, we deeply thank them and are indebted to them for their continuing support of that base. They have been loyal, they have been hardworking, and they have been very dependable. And we thank them for that.

Recognizing the concerns that the minister made, we have delayed the transition of that reduction to October of 2014. We will maintain, in addition, a 24/7 fire and emergency services there and we are committed to a 3-to-1 ratio of employees from the local community. For every one that the United States employs, we will employ three of the local community with regards to jobs.

A second area of focus will be to explore opportunities to expand our trade and business relationship. I'm pleased that the United States European Command will host a delegation of business executives next month, which will include a visit to the Azores that may provide opportunities for expanded economic development there.

And, finally and most critically, as I mentioned, we're committed to expanding our mil-to-mil relationship with a focus on the key security challenges of the future. We have a bilateral team made up of officials from the Pentagon and from the ministry that are continuing to work on the efforts to look at additional opportunities to improve our relationship and to renew and to re-emphasize the strong relationship between the United States and Portugal.

Earlier today, I had the opportunity to visit Strike Force NATO here in Lisbon. This was a decision to move that headquarters here to Portugal. This is an important new expeditionary naval headquarters, and it's demonstrating how the United States and Portugal can lead on maritime security and on other areas of concern involving NATO. It will play a vital role not only in strengthening our bilateral cooperation in this area, but in enhancing NATO's maritime capabilities.

I had a chance to visit different offices within that headquarters -- made up of intelligence, operations center -- and it really is, I think, what I would call a model headquarters for a number of countries to work together under NATO to implement the vital operations that we need to implement for the future.

We're also looking to deepen the cooperation between Portuguese and the U.S. special operations forces through increased training and exercises, which will enhance our shared efforts to build partner capacity in the region and beyond. I should also point out that we will not only increase our exercises and our training and our presence, but we will continue to have important visits here, such as the Harry S. Truman carrier group, which will be visiting within the next few weeks, and we will have other ships visiting ports here, as well.

The defense strategy the United States released one year ago this month makes clear that in an era of fiscal constraint, it remains essential for us to invest in our historic alliances with countries like Portugal and for all of us to invest in alliance capabilities.

By committing ourselves today to expand our strong defense relationship into new areas, we are, in fact, beginning a new era in the relationship between the United States and Portugal; one that will meet the challenges of the 21st century together. We are fulfilling that vision and helping to build a safer and more secure world for both of our nations.

My presence here, as a son of Europe, is to reaffirm that Portugal is a vital part of our history, our family, and our security, and always will be. Thank you.

Q (through translator): I would like to ask this question of both of you. Mr. Panetta, what type of opportunities -- investment opportunities -- is the United States available to compensate the reduction in troops in the Lajes base?

SEC. PANETTA: The purpose of the visit by these business executives is to determine what areas we can develop in terms of investment to provide added jobs and opportunities for that area. This has been an effective group of business executives, by the way. This is -- I've worked with BENS [Business Executives for National Security] -- they're called the BENS group. They've been very involved in supporting our military. And they've been very involved in helping to support our allies, as well.

And so we ask them to go there and to look at, what are the economic opportunities that can be developed for the future? It's important. I mean, they're -- the Azores is beautiful. There are a lot of opportunities that we think can be developed there. And it could be a real investment for the future, so let's wait and see what their recommendations are, but I think it's an important step in the right direction.

MIN. AGUIAR-BRANCO (through translator): Thank you for your question. I had the opportunity to tell the defense secretary that there are two important areas, that the timetable for the reduction of the U.S. forces in Lajes, that this happened the later the better, and that the timeline and criteria be as favorable to the workers and the region as possible, be it the reduction and the planning in this area.

On the one hand, the government will be able to mitigate the effects of this retreat and to study the possibility of structural funds to support what is happening now in the island. It will also permit us to work in the bilateral relationship in order to find other projects and alternatives for -- to mitigate the situation.

I would also like to point out the importance -- the importance of the visit in February of a group of businessmen -- U.S. businessmen linked to the defense area to evaluate and assess the opportunities -- business opportunities that are now open. These two reasons -- this will be a way to reinforce the cooperation, strategic cooperation between the United States and Portugal, and to allow -- to allow projects to mitigate the situation and the situation in the local economy.

Q: Mr. Secretary, yesterday, you spoke to us a little bit about U.S. participation in Mali. I was wondering if you could just expand a little bit today on some of your concerns about the French operation. There have been some setbacks, there have been some problems with the French operation. The insurgents have been gaining ground, getting closer to the capital. Do you see this as making the situation more urgent for the U.S. to do something?

The French are also putting ground troops in. Is there some consideration by the U.S. to also provide ground troops? And have you made any decisions on other aid that the U.S. can provide?

SEC. PANETTA: There -- there is no consideration of putting any American boots on the ground at this time. We have commended the French for this effort to try to go in to Mali to stop the AQIM, these terrorists and members of al Qaeda from being able to develop a base of operations in Mali. And we have -- we have always been concerned about efforts by al Qaeda to establish that kind of base. And our commitment ever since 9/11 has been to go after al Qaeda wherever they are and to make sure that they have no place to hide.

And so the effort that France has embarked on is one that the international community supports. The United Nations has supported what the French are doing. And our hope is that we can work with the French to provide whatever assistance we can to try to assist them in that effort.

The hope is that ultimately they will be able to succeed in establishing better security for Mali and that ultimately the African nations will be able to deploy a presence there to ensure that they can do everything necessary to make sure that Mali is secure and free from the influence of al Qaeda and AQIM.

Q: (off mic)

MIN. AGUIAR-BRANCO (through translator): I would also like to confirm the -- the contents of our meeting. It's a situation that is very serious, both at a political level, as in security and human rights, and it is a threat to peace and international security, both to the region and to Europe.

Portugal believes that France's actions contribute to destabilizing the region. And on Thursday, there will be a meeting of foreign ministers of the European Union where this situation will be analyzed for training of Mali troops. This will define the national strategy, and we expect to have international cooperation.

Q (through translator): A question for both of you. Mr. Secretary of Defense and the Portuguese defense minister, after 2014, what type of support does the United States believe that the NATO countries and member of NATO after -- after the United States retreats from Lajes? Afghanistan, I'm sorry.

SEC. PANETTA: All of the nations involved in Afghanistan, made in Chicago -- and it comes from the Lisbon conference, as well -- is the commitment that we will do everything possible to maintain an enduring presence in Afghanistan beyond the end of 2014. Our goal right now, obviously, is to work these next two years to complete the transition of authority, both security and governance, to the Afghans.

We have implemented a number of tranches now -- I believe we're in the process of implementing the fourth tranche of areas that place almost 75 -- in excess of 75 percent of the population in Afghanistan under Afghan security and control. We'll complete tranche five -- or we'll begin the implementation of tranche five sometime in August of 2013. Now that will represent the last group of provinces that will be turned over to Afghanistan.

In the early spring, we will turn over the lead to Afghanistan on combat operations so that they will lead those combat operations and ISAF, and the United States will be in support. And so we will -- we will continue to support them as they implement this transition and as we begin a gradual drawdown towards the end of 2014.

But as the president of the United States made clear, we have a commitment for an enduring presence there. And we -- we look forward not only to the United States, but to NATO being part of that enduring presence in the future.

MIN. AGUIAR-BRANCO (through translator): I would like to remind, first of all, the reasons of the international intervention in Afghanistan in the combat against terrorism. And I would like to note the role of Portugal in this international situation and in the combat.

It's good to remind -- it is important to remind Portugal's role in a combat of this nature. Portugal is faithful to the principle that was established in Lisbon: together in, together out. That is, within the timetable that is established, gradually and coordinated, Portugal will start to reduce its troops in Afghanistan as of October, and we will stop participating in these -- in the airport in Kabul. And because of this reduction, 230 military to 158 troops.

This is, after 2014, we will accompany and follow closely through the ministers of defense meeting at NATO, it will be through that -- the follow-up of this meeting that we will define the situation after 2014. We have no predicted situation right now for the future. Our participation will always be related to a -- a reduction in our budget.

Q: Secretary Panetta, you took your job at the Pentagon shortly after the death of Osama bin Laden. I believe you said that al Qaeda core leadership was at the brink of strategic defeat.

You know, and today the U.S. military's engaged in fighting al Qaeda and its affiliates in Somalia and Yemen. We're seeing a resurgence in al Qaeda fighters in Mali, Syria, Iraq. Do you still think al Qaeda's on the brink of strategic defeat? And as you leave this job, what's your assessment of the threat to the United States posed by its affiliates in these other countries?

SEC. PANETTA: You know, I -- I believe strongly that as a result of the efforts by the United States, particularly our intelligence and military personnel, that as a result of strong efforts to go after the leadership of al Qaeda, particularly in the FATA in Pakistan, that we have significantly weakened al Qaeda's leadership capabilities, their command-and-control, and their ability to put together the kind of attack that we saw on 9/11. So I honestly believe that, after four years, America is safer from that kind of attack that we experienced on 9/11.

Having said that, al Qaeda still remains a threat. And they have relocated in other parts of the world. We know they have a presence in Yemen. We know they have a presence in Somalia. We know they have a presence in Iraq. And obviously, they have a presence with AQIM in North Africa.

And we are continuing to go after al Qaeda in these areas. We have had successful efforts to weaken al Qaeda in Yemen, and we are continuing those operations, working with the country of Yemen to conduct those operations that I think have -- have seriously weakened AQAP, the al Qaeda version in Yemen.

We have been very successful, I believe, as well, in the efforts to go after al Qaeda in Somalia. Al-Shabaab, which represented a real threat there, you know, they're still there, but the fact is that Somalia has been greatly strengthened in terms of its ability to stop Al-Shabaab and to stop the growth of terrorism there.

The job is not finished. We have to continue the -- hopefully, the effort to go after al Qaeda in -- in Iraq. We have to continue the effort to go after al Qaeda where it decides to locate. There's an al Qaeda presence in Syria that concerns us. And there is the AQIM version of al Qaeda in -- in Mali. And it's for that reason that we are supporting the French in their effort to try to make sure that -- that we not only stop their advances, but that we weaken their ability to locate a base of operations there.

The fact is that the war on terrorism continues. We have made good progress. We have undermined their ability to conduct the kind of attacks that they would like to conduct. But the war on terrorism continues.